Private investment highlighted as motor for growth

BEIJING — The State Council called for speeding up major infrastructure projects and increasing private investment to stabilize growth on July 27.

Though many projects are in need of investment, large sums of private capital are not being pumped into the economy, experts said.

Private investment increased by only 2.8 percent in H1, down from 3.9 percent in the first five months of the year, and 5.7 percent in Q1. This is far lower than growth in private investment over the last decade, which was over 20 percent year on year.

To stem the downturn, governments at all levels should cut red tape for private investment projects and formulate a system to guard against government “inaction,” the council said.

China has conducted a review examining the implementation of 39 State Council documents from 2014 that encouraged social investment in key innovation sectors.

The month-long review was announced at an executive meeting of the State Council, presided over by Premier Li Keqiang in May.

“Any decline in private investment will affect the vitality of China’s economy. Private investment is a crucial driving force for the country’s private economy, which provides over 80 percent of the country’s total employment opportunities,” Premier Li said.

Private investment has accounted for about 64 percent of the total fixed-asset investment in each of the past three years, according to the National Development and Reform Commission (NDRC), China’s top economic planner.

As China transitions from an export-driven to a consumer-driven economy, private investment is expected to be the long-term driving force for growth.

The Premier has often called on local governments and ministries to provide support for private investment, once saying “we should not offer umbrellas on sunny days and take them away while it is raining.”

China should loosen market access to encourage private investment, and move to allow private capital to enter industries where it was formerly prohibited by law, as well as areas open to foreign capital, according to NDRC.

China’s economy grew 6.7 percent year on year in Q2. Although this remains within the government’s target range of 6.5-7 percent for 2016, the growth rate is the country’s slowest quarterly growth since the first quarter of 2009.